Foster Carer Tax Relief
Qualifying Care Relief
Qualifying Care Relief is deducted from your overall income, which includes your weekly fostering allowance, and is made up of two parts:
- A FIXED AMOUNT OF £18,140 FOR EACH HOUSEHOLD FOR A FULL YEAR
- A WEEKLY TAX RELIEF ALLOWANCE FOR EACH CHILD IN YOUR CARE:
- £375 for children aged under 11
- £450 for children aged 11 or over
After your Qualifying Care Relief and any additional expenses have been deducted, the balance represents your taxable income. The weekly fostering tax allowance runs from Monday to Sunday.
So, if a child stays with you for 1 night, you’ll be entitled to 1 week of tax relief. If the child comes to you on Saturday and leaves on Tuesday, you’re entitled to 2 weeks of tax relief. Make sure you record the days children arrive and leave your care and submit it correctly on your tax return. If you’ve been fostering for less than a year or there’s more than one foster parent in your household, read this guidance about how the fixed amount works.
Do Foster Parents Pay Tax?
Whether you pay tax will depend on several factors, including the number of children you have in placement, the type of placement and whether you receive enhanced fees, and whether you receive any other income aside from fostering.
However, in general, if you’re caring for 1 child and do not have any other source of income, the Qualifying Care Relief should be higher than the income received and therefore you will not pay tax.
Foster Care Tax Examples
Steve cares for one young person (aged 16) in placement and has been cared for a full tax year.
- Steve has 2 years of fostering experience and receives £32,500 from Lighthouse Fostering
- Qualifying care relief: £18,140
- Foster carer tax relief (£450 per week for over 11's): £23,400
- Total tax relief: £41,540
Therefore, Steve will pay no tax.
Foster Care Tax Examples
Jane cares for two young people (aged 6 and 9), both placements have been in care for a full tax year.
- Jane received £55,120 from Lighthouse Fostering
- Qualifying care relief: £18,140
- Tax relief for the 7-year-old (£375 x 52): £19,500
- Tax relief for the 10-year-old (£375 x 52): £19,500
- Total tax relief: £57,140
Jane received £55,120 in fostering payments from Lighthouse and therefore will not pay any tax
Foster parents will also have their Personal Allowance, which can also be used for tax relief and would currently give £12,570 additional tax-free if needed.